ACIT, PATIALA vs. M/S VISHAL PAPER INDUSTRIES PVT. LTD., PATIALA

आदेश/ORDER Per Annapurna Gupta, Accountant Member

The present appeal has been filed by the |Revenue against the order of the Commissioner of Income Tax (Appeals), Patiala (in short ‘CIT(A)’ dated 31.7.2014 passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).

2 . T h e s o l e i s s u e r e l a t e s t o a d d i t i o n m a d e o f s h a r e p r e m i u m r e c e i v e d b y t h e a s s e s s e e d u r i n g t h e y e a r a m o u n t i n g t o R s . 9 3 , 8 0 , 0 0 0 / - f r o m d i f f e r e n t p a r t i e s t r e a t i n g t h e s a m e a s u n e x p l a i n e d b y t h e A . O . a n d w h i c h a d d i t i o n w a s d e l e t e d b y t h e C I T ( A ) .

3 . B r i e f f a c t s r e l a t i n g t o t h e c a s e a r e t h a t d u r i n g a s s e s s m e n t p r o c e e d i n g s t h e A . O . n o t e d t h a t t h e

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a s s e s s e e h a d r e c e i v e d s h a r e p r e m i u m o f

R s . 9 3 , 8 0 , 0 0 0 / - f r o m n i n e p a r t i e s a s u n d e r :

Sr. No Name Address Amount paid 1 M/s Shalini Holdings Ltd. C-4/151, First Floor, Sector 560000/- 6, Rohini. 2 1120000/- M/s Nandal Finanace and C -33, 2nd Floor, Prashant Leasing Pvt. Ltd, Vihar, New Delhi. 3 M/s Aasheesh Royal Palace, G-55, Laxmi 1400000/- CapitaTj Services Pvt. Ltd, Nagar, Vikas Marg, New Delhi. 4 560000/- M/s Attractive Fin-lease 203, 18/12, WEA, Pusa ltd. Lane, Karol Bagh, Delhi- 5. 5 M/s Finage leasing 106, Patel Nagar, New 1400000/- and Finance (India)Ltd Delhi 6 840000/- M/s Sunny Cast & Forge 14A/33, WEA, Jetking Ltd. Building, Guru Nanak Market, Karol Bagh, New 7 1120000/- M/s Apporva Leasing Fin. 104, Single Storey, Ramesh and Investment Co. Ltd, Nagar, New Delhi. 8 980000/- M/s Avail Financial 555, Double Storey Market, Services Pvt. Ltd, New Rajinder nagar, New Delhi. 9 560000/- M/s Solomon Holdings Room No. 401, 3198/15, Pvt. Ltd, 4m Floor, Gali No.1, Sangatrashan, Paharganj, New Delhi. Total 93,80,000/-

parties u/s 133(6) of the Act ,i.e PAN Number, proof of filing

return of income for the impugned year, computation of

income, copy of bank statement from where cheques were

issued and the source and mode of receipt of funds for

investing in the impugned share premium alongwith copy of

the relevant ledger account. In the case of four parties at

S.Nos.1, 2, 3 and 4, in the table above, the notices were

returned back undelivered since the parties could not be

traced/found at the said addresses. In case of three parties

at Sr.Nos.5, 6 and 7 of the table above, no reply was

received, while in the case of remaining two parties at

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Sr.Nos.8 and 9 of the table above, the A.O. noted that

incomplete information was provided which did not provide

sufficient evidences to prove the genuineness and

creditworthiness of the transaction and of the applicant. The

assessee was, therefore, asked to show cause as to why the

amounts of share premium be not disallowed interest he

absence of any corroborative evidence. The assessee sought

time for producing/confirming the transaction from the

parties. However the A.O. thereafter passed assessment

order making addition of the impugned share premium

treating the same as unexplained and ingenuine u/s 68 of

the Act.

where the assessee contended that it had discharged its

onus of proving the genuineness of the impugned transaction

by filing necessary documents proving the identity, the

genuineness and the creditworthiness of the investors. The

Ld. counsel for assessee contended that it had filed copy of

the acknowledgement of return of income, copy of their

resolution to purchase shares, copy of their audited

statement of accounts and bank account statements. The Ld.

counsel for assessee further contended that the A.O. had

only disputed the share premium having accepted the

amount invested as share capital by the very same investors

and, therefore, it could not be said that the impugned

premium remained unexplained. The Ld. counsel for

assessee further collected the required information from the

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investors and submitted the same of the Ld.CIT(A) stating

that it had tried conducting the investors for submitting this

information during assessment proceedings but it took time

and cannot be furnished by the time the assessment was

completed. It was further contended that some of the letters

could not be served to the parties because there was change

in the correspondence address of the companies which the

said parties had explained and written their new addresses

in their information letters. The submissions of the assessee

were forwarded to the A.O. for his counter comments who

reiterated his contention made in the assessment order. The

Ld.CIT(A) after considering the contentions of both the

assessee and the A.O. held that the documents forwarded to

the A.O. had not been controverted by him and the said

documents showed that the investors company had sufficient

capitals and reserves that investment had been made

through bank accounts and copy of their income tax returns

had also been submitted. In view of the same, the Ld.CIT(A)

held that the identity, creditworthiness and genuineness of

the transaction was not in doubt. The Ld.CIT(A) further

stated that the A.O. had disallowed the investment merely

because the parties could not be produce. Thereafter

referring to various decisions of the Hon'ble High Court the

Ld.CIT(A) held that the assessee had fully discharged its

onus to prove the genuine of the transaction and

accordingly, deleted the addition made. The relevant finding

of the Ld.CIT(A) at para 6.3 of his order is as under:

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“6.3 I have considered the submissions made and also perused the assessment records. It is noted from the submissions & assessment record that the appellant during the course of assessment proceeding has duly submitted the copies of resolution of the Board of Company regarding allotment of shares, application from the respective subscriber companies for allotment of shares. The PAN No., copy of lTR with acknowledgement, list of Directors with addresses and Bank Statement of the subscriber companies were also filed. Further, the audited copies of the Balance sheet and P&L A/c and the acknowledgement regarding receipt of share certification were also filed. In case of Shalini Holdings Put. Ltd., the copy of assessment order passed u/s 143(3) for A.Y. 1993-94 was also filed. The appellant during the course of appellate proceedings has also submitted that the A.O. has accepted principle amount of investment in shares by these companies. The share premium has been paid by these companies against the principle investment in the shares. The share-holders are existing assessees and copies of the ITR have also been submitted. The payments have been made through account payee check and copy of bank statement were also submitted in support. The copy of the audited statement of accounts and bank account statements, the copies of resolution to purchase shares has been submitted. During the course of appellate proceedings, therefore, it is submitted that the identity of the persons is proved furnishing the acknowledgement of return of income, PAN No. of the persons. These companies are registered with the registrar of the companies. The genuineness of the transactions is proved by the providing the Bank Account statement of all these persons and the money has been received by Account Payee Cheques. The creditworthiness is also proved by the audited accounts of statement. It is further submitted that such details are not controverted by the A.O. The appellant further submitted that the appellant's company volunteered to do the needful to place the information sought u/s 133(6) on record and in case the information is not sent by the parties, it will try to produce the investor company. However, through the assessee company tried to contact the investor companies and the information was collected from that them it took time and the same could not be furnished on or before 25.03.2013 on which date the assessment was completed and the information collected thereafter, remained with the appellant. The appellant further relied on various case laws and submitted that no addition can be made u/s 68 in the case of the assessee company. It was also seen from the assessment record that the assessee vide letter dated 18.03.2013 submitted that the assessee can not be penalized for conduct of third parties over which it has no control. Further, vide order sheet entry dated 25.03.2013, it was submitted by the counsel of the appellant that it is not possible to produce these parties on 25.03.2013, as the concerned persons are out of station on account of long week and an occasion of Holi and Good Friday holidays. However, the A.O. completed the

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assessment on the same date. The appellant also submitted that there was a change of address in some cases and the new addresses were duly filed in the information letters now. All such documents were forward to A.O. which is not controverted. Further, as per details submitted, the shares capital of the investor companies and reserves and surplus are as under:-

M/s Vishal Paper Industries Pvt. LTd., Patiala

Assessment Year 2010-11 Details of Additions in Share Capital Account & Enclousers Thereof S.No. Name of the Share Share Capital Reserve & Holder of The Company Surplus 1. Aasheesh Capital I23.355.000.00 1,107,945.000.00 Services Pvt. Ltd. 2. Apoorva Leasing 199,749,000.00 998,865,500.00 Finance & Investment Company Ltd. 3. Solomon Holdings Pvt. 19,304,000.00 172,852,010.00 Ltd. 4. Avail Financial Services 16,330,000.00 82,630,000.00 Pvt. Ltd. 5. Nandal Finance And 122,583,000.00 1,068,778,734.62 Leasing Pvt. Ltd. 6. Attractive Finlease Ltd. 105,505,000.00 945,045,000.00

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legal bar to more than one company being registered at the same address. Merely because the applicants did not respond to the notices sent to them, the A.O. was not justified in adding the amount of share application money to the income of the assessee. In the case of CIT vs. Dwarkadhish Investment (P)Ltd. 330 ITR 298 (Del) the assessee company received share application money. The Hon'ble High Court held that the initial burden of proof lies on the assessee yet once he proves the identity of the creditor/share applicant by either furnishing their PAN or Income tax assessment number and shows the genuineness of transactions by showing money in his books either by account payee cheques or by draft or by in other mode, these onus of proof would shift to the revenue. Just because the creditors/share applicants could not be found at the address given, it could not give the revenue the right the invoke section 68. Moreover it is a settled law that the assessee need not prove the "source of source." In this case the tribunal has confirmed the order of CIT (A) deleting impugned addition and held that the assessee has been able to prove the identity of share applicants and the share application money has been received by way of account payee cheqeus. In the case of Commissioner of Income Tax vs. Lovely Export (P.) Ltd. decided on nth January, 2008 by the Supreme Court of India reported in 216 CTR 195: It has been held as under:- "If share application money is received by assessee-company from alleged bogus shareholders, whose names are given to Assessing officer, then Department is free to proceed to reopen their individual assessments in accordance with law but these amount of share money can not be regarded as undisclosed income under section 68 of assessee company. (Special leave petition of the revenue is dismissed) " Thus, in this case, the appellant has duly discharged his onus. He has filed the copies of lTR of the companies, PAN etc establishing the identity of the subscriber. The transaction is through Bank and as per audited copies of Balance Sheet there is sufficient capital and Reserve with the subscriber. Moreover, as contended by the appellant, the share capital subscribed is duly accepted by the A.O. while share premium is disallowed. During the appellate proceeding the appellant again filed the confirmation which was also forwarded to the A.O. and are not rebutted. Relying on the ratio on decision in the case laws as above, in my opinion, the appellant cannot be punished for non-appearance of the subscriber once the appellant has submitted complete details establishing the identity and creditworthiness of the subscribers and genuineness of the transactions as held in the case of CIT vs, Lovely Export Pvt. Ltd. (SC) 216 CTR 195 and under such circumstances no addition can be made in the hands of the assessee company.

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Thus relying on the cases as above and submission made, the addition made by the A.O. is hereby deleted.” 6. Aggrieved by the same, the Revenue has come up in

appeal before us, raising the following grounds:

“1. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of. Rs.93,80,000/- made by the AO on account of share premium, ignoring the fact that the assessee had failed to discharge the onus of proving the identity and creditworthiness of the alleged shareholders & genuineness of the transactions to the satisfaction of the AO at the time of the assessment proceedings, since four companies could not be traced at their given addresses, three companies did not comply with the notice issued to them, the balance two companies submitted incomplete information and the assessee also could not produce the companies before the AO. 2. In the facts and circumstances of the case, the Ld. CIT(A) has erred in accepting assessee's version about genuineness of investors without giving an opportunity to the AO to call the companies so as to complete the inquiry he had initiated in respect of companies, especially since four companies were not found at their given addresses, three companies did not respond to the inquiry notice and the balance two companies furnished incomplete information. 3. In the facts and circumstances of the case, the Ld. CIT(A) has erred in relying on fresh information letters and changed addresses admittedly not supplied by assessee to the AO during the assessment proceedings, without admitting the fresh addresses and information letters as fresh evidence by following the procedure laid down under Rule 46A and without giving any opportunity to the AO to examine such evidence, only on the ground that the information forwarded to the AO remained uncontroverted, without appreciating the fact that without admission of fresh evidence by the Ld. CIT(A), the AO could not examine the same. 4. In the facts and circumstances of the case, Ld. CIT(A) has erred in relying on the decision of the Hon'ble Apex Court in the case of CIT Vs. Lovely Exports Pvt. Ltd., without appreciating that, as pointed out by the Hon'ble Delhi High Court in the case of CIT Vs. Nova Promoters and Finlease (P) Ltd., 342 ITR 169 (Del.), in that case the AO did not carry out any enquiry about the share applicants, whereas in the present case, the A.O. had tried to conduct enquiries in respect of all the nine companies but either the companies were not found or did not respond or they furnished incomplete

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information to him. 5. It is prayed that the order of the Ld. CIT(A) be set aside and that of the AO restored. 6. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of.” 7. During the course of hearing before us he Ld. DR relied

upon the order of the A.O. while the Ld. counsel for assessee

relied upon the order of the Ld.CIT(A).

carefully gone through the order of the Ld.CIT(A). We find no

reason to interfere in the same. The Ld.DR has not

controverted the factual findings of the Ld.CIT(A) that the

assessee had submitted necessary documents evidencing the

identity, the genuineness and the creditworthiness of the

investor companies during assessment proceedings, as

stated at para 6.3 of his order as under:

6.3 I have considered the submissions made and also perused the assessment records. It is noted from the submissions & assessment record that the appellant during the course of assessment proceeding has duly submitted the copies of resolution of the Board of Company regarding allotment of shares, application from the respective subscriber companies for allotment of shares. The PAN No., copy of lTR with acknowledgement, list of Directors with addresses and Bank Statement of the subscriber companies were also filed. Further, the audited copies of the Balance sheet and P&L A/c and the acknowledgement regarding receipt of share certification were also filed. In case of Shalini Holdings Put. Ltd., the copy of assessment order passed u/s 143(3) for A.Y. 1993-94 was also filed.

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cast upon him. Further ,we find that the CIT(A) has noted

that the information sought for by the A.O. by making his

own enquiry u/s 133(6) of the Act from the said investors

was also collected by the assessee from the said investors

and provided during appellate proceedings which was

confronted to the A.O. who did not find any infirmity in the

same. This fact has also remained uncontroverted before

us. Thus it stands that the concerned parties had also

independently confirmed the transactions. The CIT(A) ,we

find also took note of the financial position of the investor

companies and found that they had sufficient capital and

reserve to make the investment. Ld.DR has been unable to

controvert this fact also. The creditworthiness of the

investor companies thus stands sufficiently established.

Moreover the addition in the impugned case is only of the

share premium received, and we agree with the Ld.CIT(A)

that having accepted the share capital received from the

same investors, there was no reason to doubt the premium

thereon .

with the Ld.CIT(A) that the genuineness of the transaction

stood established and we do not see any reason to doubt the

same. Even the Ld. DR has been unable to point out from the

order of the A.O. as to why the impugned transactions were

to be looked at with suspicion. The assessee had established

the genuineness of the transactions by filing relevant

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documents and the same was confirmed by the investor

companies also, no infirmity in the documents filed either by

the assessee or by the investor companies has been pointed

out by the Revenue. We fail to understand, therefore, why

the impugned transaction should be treated as

unexplained/ingenuine. Also having established the

genuineness of the transaction with necessary documents,

as above, the onus shifted to the Department, and having

not pointed out any infirmity in the documents submitted by

the assessee, the assessee was not any more required to file

further evidences or even produce the directors of the

companies. We agree therefore with the Ld.CIT(A) that the

share premiums could not be said to be ingenuine merely

because the directors of the companies were not produced

for examination.

the addition before us on the ground that the assessee did

not discharge its onus during assessment proceedings and

adequate opportunity was not given to the AO to complete

his inquiry vis a vis the investor companies and further that

the CIT(A) admitted the additional evidences without

following the procedure laid down in Rule 46A of the Income

Tax Rules,1962 for the same.

the Revenue since as held above by us the assessee had duly

discharged its onus of proving the genuineness of the

transaction and the A.O. had been given sufficient

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opportunity to conduct all inquiries vis a vis the said investors in remand proceedings. Further we find that the CIT(A) had noted the fact that though the assessee had sought time to produce the investors, the AO without giving any further opportunity finalized the assessment. In this backdrop the CIT(A) admitted the evidences filed by the assessee collected from the investors and forwarded them to the AO for his comments. The CIT(A) therefore, we hold, had duly admitted the additional evidences in the circumstances enumerated in Rule 46A of the Rules, which allows the CIT(A) to admit such evidences where the assessee was not given sufficient opportunity to adduce the same earlier.

In view of the above, all the ground raised by the Revenue are dismissed.

1 3 . In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Open Court.

Sd/- Sd/- संजय गग� अ�नपूणा� गु�ता (ANNAPURNA GUPTA) (SANJAY GARG) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 29th March, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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